The Reserve Bank of India has issued draft Amendment Directions, 2026, for payments banks to revise the framework governing the Investment Fluctuation Reserve (IFR). Unlike commercial banks, where IFR is proposed to be discontinued, the RBI has retained IFR for payments banks but modified its applicability due to operational constraints. Under the draft, payments banks must create IFR from realised gains on the sale of investments, subject to the availability of net profit, until the reserve reaches at least 2% of their AFS (Available for Sale) and FVTPL (Fair Value Through Profit and Loss, including HFT) portfolios. This threshold is to be assessed annually based on balance sheet values. The amendment aims to ensure prudent risk management while providing flexibility in maintaining IFR. Issued under Section 35A of the Banking Regulation Act, 1949, the directions will take effect upon notification, subject to stakeholder feedback.
Reserve Bank of India
RBI/2026-27/
DOR.MRG.REC.No. /00-00-001/2026-27
XX, 2026
Reserve Bank of India (Payments Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026 – Draft for Comments
Please refer to paragraph 112 of Reserve Bank of India (Payments Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, dated November 28, 2025, on Investment Fluctuation Reserve (IFR). In view of certain operational constraints being faced by banks in the maintenance of IFR, there is a need to amend the extant instructions.
2. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (hereinafter called the Act) and all other laws enabling the Reserve Bank in this regard, the Reserve Bank, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Amendment Directions hereinafter specified.
3. (i) These Directions shall be called the Reserve Bank of India (Payments Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026.
(ii) These Amendment Directions shall come into effect on the day these are placed on the official website of the Reserve Bank.
4. The Reserve Bank of India (Payments Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, are amended as provided below.
(i) Paragraph 112 shall be substituted by the following, namely: –
“112. A bank shall create an Investment Fluctuation Reserve (IFR) out of the realised gains on sale of investments, subject to the availability of net profit, until the balance in IFR is at least two per cent of the AFS and FVTPL (including HFT) portfolio. This minimum requirement shall be assessed annually based on the AFS and FVTPL (including HFT) portfolio values as of the balance sheet date.”.
(Sunil T S Nair)
Chief General Manager
